How Does Digital Financial Inclusion Influence Bank Innovation Capability in China? Evidence from a Risk-Taking Perspective

Yi Zhou

Chapter 16 in Digital Banking and Finance:A Handbook, 2025, pp 423-445 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This study investigates the influence of digital financial inclusion (DFI) on the innovation capability of commercial banks in China from a risk-taking perspective. Utilizing a robust econometric model and data from 40 banks over a period from 2011 to 2019, the research identifies a positive and significant relationship between DFI and banks’ innovation capability. It also highlights the mediating role of risk-taking levels in this relationship. The heterogeneity analysis further reveals that the impact of DFI varies across different types of banks. The findings reveal that while all bank categories benefit from DFI, the intensity of its impact varies, with state-owned and joint-stock banks showing a stronger association than their urban and rural counterparts. The robustness tests, using alternative proxies for DFI and innovation capability, confirm the stability of the results. This study contributes to the literature by providing empirical evidence on the critical role of DFI in enhancing the innovative activities of banks and underscores the importance of risk management in the digital era.

Keywords: FinTech; Digital Era; Financial Industry; Digital Technology; Digital Financial Industry; Digital Finance; Financial Inclusion; Bank Stability; Emerging Economies; Bibliometric Analysis; Digital Finance Revolution; Global Impacts; Digital Innovation; Insurance; Big Data Applications; Digital Assets in Disarray; Forecasting Bitcoin; Machine Learning Approach; Economic Policy Uncertainty; Cryptocurrency; Bank Shares; Digital Age; Corporate Governance; Risks; Rewards; Assets Tokenization; Future of Money; Central Bank Digital Currencies; Bank Innovation; Risk-Taking Perspective (search for similar items in EconPapers)
JEL-codes: G1 G2 G24 M41 O3 O32 O33 (search for similar items in EconPapers)
Date: 2025
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